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Small Businesses Granted Relief from ACA Market Reform Excise Tax

February 24, 2015

Over the last year, the American Institute of CPAs (AICPA) heard from many members about their concerns related to the treatment of health coverage reimbursement arrangements under the Affordable Care Act (ACA) as a result of the guidance in Notice 2013-54. Specifically, tax practitioners thought the guidance unfairly penalized those small businesses that were reimbursing employees for medical expenses or health insurance premiums. There was also a lot of confusion over how to treat two percent S corporation shareholder-employee healthcare arrangements.

After months of the AICPA pressing the government for answers and transitional relief, the IRS released Notice 2015-17 on February 18, which addresses many of those questions, and provides practitioners with a roadmap to follow when helping clients during the current filing season.

Notice 2015-17 provides relief and reassurance to CPAs for the 2014 tax year on how to handle clients that have historically provided certain employer healthcare arrangements to their employees. It also extends, until further guidance is issued, relief from the penalty for two percent S corporation shareholder-employee healthcare arrangements.

While the temporary penalty relief provided by the notice is welcomed, the AICPA will continue to pursue a more permanent solution. We will also work with the government to help close the loop on the remaining items (for example, the issue of medical expense reimbursements) that were not addressed in the notice.